Opportunistic capital raise on attractive
terms
Accelerates capital and earnings improvement;
capital raise estimated to result in pro forma CET1 of
12.4%
Further strengthens Key's capacity for
growth
CLEVELAND, Aug. 12,
2024 /PRNewswire/ -- KeyCorp (NYSE: KEY)
today announced it has reached an agreement under which The Bank of
Nova Scotia ("Scotiabank") (TSX:
BNS) (NYSE: BNS) will make a strategic minority
investment in KeyCorp of approximately $2.8 billion, representing approximately 14.9%
pro forma common stock ownership, for a fixed price of
$17.17 per share.
"Scotiabank approached us with a unique opportunity to raise
capital on attractive terms. While we continue to be comfortable
with our current capital position, we determined that
the investment enables Key to accelerate our
well-communicated capital and earnings improvement while bolstering
our strategic position," said KeyCorp Chairman and Chief
Executive Officer, Chris Gorman.
"Further, this transaction creates greater capacity for growth by
enabling additional investments in targeted scale across our
franchise and increases Key's strategic agility as we navigate an
uncertain environment from a position of strength. We have a proven
track record of driving growth in areas such as investment banking,
payments, and wealth management, and we expect to leverage our
strengthened financial position to lean into these areas more
aggressively."
Transaction Details
The approximately $2.8 billion minority investment is estimated to
increase KeyCorp's June 30, 2024,
CET1 capital ratio by 195 basis points to 12.4% and increase
tangible book value per share by more than 10%.
In conjunction with completion of the capital raise, KeyCorp
intends to evaluate a potential repositioning of the
available-for-sale securities portfolio with the objective of
accelerating the timing of expected profitability, liquidity and
capital improvements, and generally increasing resiliency. The
capital raise, along with the contemplated repositioning, are
estimated to result in a strong net CET1 capital ratio in the range
of 11.3% to 11.6%,1 while being low single-digit
accretive to 2025 earnings per share and slightly accretive to 2026
earnings per share. The estimated CET1 capital ratio, pro forma for
the capital raise and balance sheet repositioning, inclusive of
AOCI is expected to be in the range of 9.1% to
9.4%,1 a 185 to 210 basis point improvement from
June 30, 2024, providing a
substantial cushion as Basel III rules are eventually
finalized. Such future actions would be subject to market
conditions and other factors.
As part of the transaction, KeyCorp and Scotiabank plan to
explore commercial opportunities to partner together in the future
to best serve their respective client bases.
Timing and Approvals
Scotiabank will purchase approximately 163 million
shares of KeyCorp's common stock in two tranches: an initial
investment of $0.8 billion, after
which Scotiabank will own 4.9% of KeyCorp's common stock, will
occur upon expiration of the antitrust waiting period under the
Hart-Scott-Rodino (HSR) Act, followed by an additional investment
of $2.0 billion, after which
Scotiabank will own approximately 14.9% of KeyCorp's common stock,
upon approval by the Federal Reserve.
The parties expect to complete the initial purchase at the end
of August and the additional purchase upon the satisfaction of
customary closing conditions and the receipt of Federal Reserve
approval, which is expected to occur in the first quarter of
2025.
Advisors
J.P. Morgan Securities LLC and KeyBanc
Capital Markets are serving as financial advisors, and Sullivan
& Cromwell LLP is serving as legal counsel to KeyCorp.
Investor Call
KeyCorp will hold a live investor
presentation call on August 12, 2024,
at 8:00 AM ET. The conference
call will be accessible through live webcast. Interested
investors and other individuals can access the webcast via
KeyCorp's Investor Relations page at https://www.key.com/ir.
A replay of the call will be available on KeyCorp's Investor
Relations website through August 12,
2025.
About KeyCorp
KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in
Cleveland, Ohio, Key is one of the
nation's largest bank-based financial services companies, with
assets of approximately $187 billion
at June 30, 2024.
Key provides deposit, lending, cash management, and investment
services to individuals and businesses in 15 states under the name
KeyBank National Association through a network of approximately
1,000 branches and approximately 1,200 ATMs. Key also provides a
broad range of sophisticated corporate and investment banking
products, such as merger and acquisition advice, public and private
debt and equity, syndications and derivatives to middle market
companies in selected industries throughout the United States under the KeyBanc Capital
Markets trade name. For more information,
visit https://www.key.com/. KeyBank Member FDIC.
About Scotiabank
Scotiabank's vision is to be our
clients' most trusted financial partner, to deliver sustainable,
profitable growth and maximize total shareholder return. Guided by
our purpose: "for every future," we help our clients, their
families and their communities achieve success through a broad
range of advice, products and services, including personal and
commercial banking, wealth management and private banking,
corporate and investment banking, and capital markets. With assets
of approximately CDN $1.4
trillion (as of April 30, 2024), Scotiabank trades on the
Toronto Stock Exchange (TSX: BNS) and New York Stock Exchange
(NYSE: BNS). For more information, please
visit www.scotiabank.com and follow us on X
@Scotiabank.
Forward-Looking Statements This press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of
1995. Forward-looking statements can be identified by words
such as "outlook," "goal," "objective," "plan," "expect,"
"anticipate," "intend," "project," "believe," "estimate,"
"potential," "contemplate," "explore," and other words of similar
meaning. Forward-looking statements represent management's current
expectations and forecasts regarding future events. If underlying
assumptions prove to be inaccurate or unknown risks or
uncertainties arise, actual results could vary materially from
these projections or expectations. Factors that could cause Key's
actual results to differ from those described in the
forward-looking statements can be found in KeyCorp's Form 10-K for
the year ended December 31, 2023, as
well as in KeyCorp's subsequent SEC filings, all of which have been
filed with the Securities and Exchange Commission and are available
on Key's website (www.key.com/ir) and on the Securities and
Exchange Commission's website (www.sec.gov). Forward looking
statements speak only as of the date they are made and Key does not
undertake any obligation to update the forward-looking statements
to reflect new information or future events.
1 Based on potential Deferred Tax Asset deduction
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SOURCE KeyCorp